the impact of recent cuts in mobile termination rates across ......a report prepared for vodafone...

© Frontier Economics Ltd, London.

The impact of recent cuts in mobile

termination rates across Europe A REPORT PREPARED FOR VODAFONE GROUP

May 2012

ii Frontier Economics | May 2012

Contents


termination rates across Europe

Executive Summary 5

1 Introduction and background 7

1.1 Our approach ................................................................................................. 10

1.2 Structure of the report .................................................................................... 11

2 There is no evidence that faster MTR cuts have led to lower mobile

prices 13

2.1 Prices have declined at a slower rate despite the accelerated fall in MTRs .. 14

2.2 Correlation analysis shows no link between MTR cuts and prices ................ 16

2.3 Additional statistical analysis also shows no evidence that faster MTR cuts

have led to lower prices ................................................................................. 17

3 There is no evidence that MTR cuts are increasing usage 19

3.1 Despite the faster falls in MTRs usage has not increased at an accelerated

rate ................................................................................................................. 19

3.2 Correlation analysis shows no evidence that MTR cuts have led to higher

usage .............................................................................................................. 20

3.3 More sophisticated statistical analysis also shows no evidence that MTR cuts

have led to higher usage ................................................................................ 22

4 A lack of convergence to a US style market 25

4.1 Comparison of Europe and US ...................................................................... 25

5 There is limited evidence of any link between MTR reductions and the

market share of smaller operators 27

6 MTR cuts and the fixed market 29

6.1 Impact on fixed-to-mobile usage .................................................................... 29

6.2 Impact on fixed-to-mobile prices .................................................................... 30

7 Accelerated MTR cuts could have a detrimental impact 33

7.1 Impact on mobile penetration rates ................................................................ 33

7.2 Impact on mobile capex ................................................................................. 36

8 Summary 39

Annex 1: Data used 41

Tables & Figures


termination rates across Europe

Figure 1. Trends in actual and projected weighted average MTRs since 2005 8

Figure 2. Cumulative impacts predicted by the Commission from faster MTR cuts

(2007-12) 9

Figure 3. Trends in weighted average MTRs and mobile prices since 2007 15

Figure 4. Correlation analysis of MTR cuts and prices (2009Q1 to 2011Q3) 16

Figure 5. Correlation analysis of MTR cuts and prices (2007Q1 to 2011Q3) 17

Figure 6. Annual reductions in MTRs and usage (2007-09 vs. 2009-11) 20

Figure 7. Correlation analysis of MTR cuts and changes in usage (2009Q1 to

2011Q3) 21


2011Q3) 22

Figure 9. Comparison of usage trends between Europe and the US (2007-11) 26

Figure 10. Comparison of price trends between Europe and the US (2007-11) 26

Figure 11. Correlation analysis of MTR cuts and changes in the market share of the

smallest operator (2009Q1 to 2011Q3) 28

Figure 12. Trends in fixed-to-mobile traffic since 2007 30

Figure 13. Correlation analysis of MTR cuts and changes in F2M prices (2009 to

2011) 31

Figure 14. Trends in F2M margins since 2007 32

Figure 15. Annual changes in MTRs and penetration rates (2007-09 vs. 2009-11) 34

Figure 16. Correlation analysis of MTR cuts and changes in penetration rates

(2009Q1 to 2011Q3) 35

Figure 17. Correlation analysis of MTR cuts and changes in capex per connection

(2009Q1 to 2011Q3) 37

Figure 18. Reduction in MTRs (2007Q1 to 2011Q3) 43

Figure 19. Reduction in Average Revenue Per Minute (ARPM) (2007Q1 to 2011Q3)

44

Figure 20. Change in minutes of use per active subscriber (2007Q1 to 2011Q3) 44

Figure 21. Percentage point change in mobile penetration (2007Q1 to 2011Q3) 45

Figure 22. Mobile termination rates (€c/min) 46

Figure 23. Mobile penetration rates (% of total population) 46

iv Frontier Economics | May 2012

Tables & Figures

Figure 24. Average revenue per minute (€c/min - voice only) 47

Figure 25. Average outgoing minutes per active subscriber 47

Figure 26. Fixed-to-mobile average revenue per minute (€c/min) 48

Figure 27. Total fixed-to-mobile usage (millions of minutes) 48

Table 1. Regression results on the link between MTRs and prices 18

Table 2. Regression results on the link between MTRs and usage 23

Table 3. Regression results on the link between MTRs and usage when accounting

for the economic slowdown 24

Table 4. Regression results on the link between MTRs and penetration rates 36

Table 5. Data used in our analysis 42

May 2012 | Frontier Economics 5

Executive Summary

Executive Summary

Mobile termination rates across Europe have been falling considerably for several

years. This is partly reflective of a general downward trend in underlying unit

costs, but also the European Commission’s recommendation in 2009 to move to

‘pure LRIC’ based termination rates.

At the time, the Commission justified the accelerated cuts in mobile termination

rates through expected benefits to consumers, in particular significant reductions

in mobile prices and increases in mobile traffic. It predicted also that lower

MTRs would help smaller operators to compete, as they would find it easier to

offer off-net prices that are comparable to the on-net prices of larger

competitors. The impact on mobile penetration rates and the fixed telephony

market were expected to be limited.

Although pure LRIC based termination rates are yet to be fully implemented in

all Member States, there is, since 2009, evidence about the impact of accelerating

mobile termination rate cuts on the performance of the mobile market and upon

its consumers. This report analyses this evidence.

Our approach

The main focus of the report is to examine the available evidence to date to

evaluate the extent to which the Commission’s recommendation has had the

expected impact on mobile prices and usage. We also consider whether the MTR

reductions have made it easier for smaller operators to compete. We then

consider whether there has been any effect on fixed-to-mobile usage, fixed

operators’ investment, mobile penetration rates and mobile operators’

investment.

We analyse the impact since 2009, as well as the longer-term relationship between

mobile termination rates and consumer outcomes.1

Policy-shift impact. We consider whether there has been a structural break

in the trends for usage and prices given the acceleration in mobile

termination rate reductions since 2009, after the adoption of the

Commission’s Recommendation. We also use correlation analysis to look at

the impact of MTR reductions in individual countries.

1 As mobile termination rates will still need to fall much further before they reach the level implied by

pure LRIC, this report should be considered as an initial assessment of the Commission’s

recommendation.

6 Frontier Economics | May 2012

Executive Summary

Longer-term relationship. We use a longer time series and statistical

techniques to examine the link between mobile termination rate cuts and

consumer outcomes.

The analysis uses data for countries in the European Union.2

Main findings

Mobile termination rates have fallen at a much faster rate since 2009. If countries

continue to move towards pure LRIC based mobile termination rates, as appears

likely, then this trend is likely to continue going forward.

Our main findings on the link between accelerated mobile termination rate

reductions and consumer outcomes are as follows.

No link to usage and prices. Although usage has increased and prices

have fallen, there is no evidence that these trends have been related to the

acceleration in the reduction in mobile termination rates. Despite a tripling

in the rate of termination rate cuts since the introduction of the

Commission’s recommendations, we have not found evidence at the EU

level of an acceleration in the rate of mobile price reductions or the rate of

usage increase. Correlation analysis and econometric analysis confirms these

findings.

No evidence of a link between MTR reductions and the market

position of smaller players. There appears to be no evidence of a positive

link between the market share of smaller operators and the acceleration in

MTR reductions since 2009.

Potential risk of lower take-up and investment. It is too early to draw

conclusions on the impact of accelerated mobile termination rate cuts on

penetration rates and investment levels - there is a risk that they could have a

detrimental impact.

2 We have excluded Cyprus, Luxembourg and Malta due to data limitations. We have also omitted

Greece, as it can be considered as an outlier due to its recent financial and economic crises.

Although including Greece would not have impacted any of our conclusions.


Introduction and background

1 Introduction and background

Mobile operators charge other operators for connecting calls to their network.

These are known as mobile termination rates (MTRs). Both mobile-to-mobile

(M2M) and fixed-to-mobile (F2M) calls incur MTRs.

Operators are considered to have significant market power (SMP) when

providing call termination services on their network. As such, regulators typically

require MTRs to be regulated and, generally, cost reflective.

The level of MTRs across Europe has been falling at a considerable rate for

several years. This has been driven by two factors.

1. A general downward trend in the underlying unit costs of delivering these

services (as a result of both expanded output and technological developments).

2. The European Commission’s recommendation in 20093 stated that MTRs

should be set on a ‘pure LRIC’ basis (i.e. they should only reflect the long run

incremental cost exclusive of any fixed and common costs) and that in

exceptional circumstances where a national regulator cannot develop a cost

model in time, then it must set interim prices that are consistent with the

Recommendation.

Whilst the Commission envisaged that the recommended move to pure LRIC

based MTRs would take several years, MTRs have been falling at a much faster

rate since 2009 (see Figure 1). The Commission envisaged in 2009 that ‘pure

LRIC’ MTRs would be between 1.5 cents and 3 cents by the end of 2012. In the

event, based on current trends, MTRs in Europe by late 2014 could be expected

to fall to approximately 1 cent

3 Commission Recommendation on the Regulatory Treatment of Fixed and Mobile Termination

Rates in the EU – Implications for Industry, Competition and Consumers (07/05/2009).



Figure 1. Trends in actual and projected weighted average MTRs since 2005

Source: Frontier analysis based on BEREC information & published MTR glide paths

The Commission justified accelerated MTR cuts by arguing that they would

improve consumer outcomes. In particular, it forecasted that as a result of a

move to pure LRIC, mobile prices would fall almost twice as fast and mobile

traffic would increase at almost double the rate. This is shown in Figure 2

below.4

The Commission acknowledged that there could be a ‘waterbed’ effect, such that

average mobile prices could increase as F2M mobile revenues fell, partially

offsetting falls in mobile-to-mobile prices, resulting also from the MTR

reductions. But unlike Valleti and Genakos (2008)5 and our previous report6, the

4 The baseline scenario reflects the Commission’s expected consumer outcomes if MTRs fall in line

with reductions in underlying costs, but without a move to pure LRIC. The recommended approach

shows the Commission’s predicted consumer outcomes if MTRs fall in line with costs and MTRs

are set based on a pure LRIC approach.

5 Genakos and Valletti (2008): “Testing the ‘Waterbed’ Effect in Mobile Telephony”, CEIS TOR

Vergata, Research Paper Series, Vol.6, Issue 2, No. 110.

6 Frontier Economics, ‘Assessing the impact of lowering mobile termination rates’, July 2008.

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

1Q2005

3Q2005

1Q2006

3Q2006

1Q2007

3Q2007

1Q2008

3Q2008

1Q2009

3Q2009

1Q2010

3Q2010

1Q2011

3Q2011

1Q2012

3Q2012

1Q2013

3Q2013

1Q2014

3Q2014

Weig

thed a

vera

ge M

TR

(€c p

er

min

ute

)

-12.9% CAGR

(2005 to 2009)

-35.5% CAGR

(2009 to 2011)

-35.2% CAGR

(2011 to 2014)EC MTR

recommendation



Commission did not expect the waterbed effect to be strong. It predicted that an

increase in competition would offset any waterbed effect7:

“Increased competitive pressure resulting from the creation of a more level playing field for the

provision of mobile calls will help ensure a continued downward momentum for overall retail

prices, thereby off-setting any potential short-term waterbed effects.”

It also anticipated a limited impact on mobile penetration rates and the fixed

telephony market.

Figure 2. Cumulative impacts predicted by the Commission from faster MTR cuts (2007-12)

Source: Commission’s Final Impact Assessment of its 2009 MTR recommendation

The relationship between MTRs and consumer outcomes continues to be hotly

debated, both from theoretical and empirical perspectives. The UK Competition

Commission recently concluded that:

“…., we are not persuaded that setting MTRs at LRIC would reduce mobile retail prices

overall, and it is not clear that doing so will increase mobile usage.”8



8 Competition Commission – Final determination on MTRs (09 February 2012).

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Average mobile priceper minute

Total mobile calltraffic

Fixed-to-mobile priceper minute

Total fixed-to-mobilecall traffic

Baseline scenario - (40% MTR reduction to €c5.5 in 2012) - no pure LRIC

Commission’s recommended approach - (70% MTR reduction to €c2.5 in 2012) - pure LRIC



Although the Commission’s recommendation has yet to be fully implemented in

all Member States, there is a significant body of evidence about the impact of

accelerating MTR cuts on the performance of the mobile market and upon its

consumers, since 2009. This report analyses that data.

1.1 Our approach

The main focus of the report is to examine the available evidence to date to

evaluate the extent to which the Commission’s Recommendation has had the

expected impact on mobile prices and usage. We further consider whether there

has been any effect on fixed-to-mobile usage, fixed operators’ investment, mobile

penetration rates and mobile operators’ investment.

Member States started to implement an MTR policy that is consistent with the

Commission’s Recommendation since 2009.9 As shown by Figure 1, MTRs

started to fall at a much faster rate after this point. As MTRs will still need to fall

significantly further before they reach the level implied by pure LRIC, this report

should be considered as an initial assessment of the Commission’s

recommendation.10 We analyse the impact since 2009, as well as the longer-term

relationship between MTRs and consumer outcomes.

Policy-shift impact. We consider whether there has been a structural break

in the trends for usage and prices given the acceleration in mobile

termination rate reductions since 2009, after the adoption of the

Commission’s Recommendation. We also consider whether the MTR

reductions have made it easier for smaller operators to compete. We then

use correlation analysis to look at the impact of MTR reductions in

individual countries.

Longer-term relationship. We use a longer time series and statistical

techniques to examine the link between mobile termination rate cuts and

consumer outcomes.

The analysis uses data for countries in the European Union. We have excluded

Cyprus, Luxembourg and Malta due to data limitations. We have also omitted

9 Member states have responded to the Commission’s Recommendation at different rates. Countries

such as Spain, the UK and Italy have already set glidepaths to pure LRIC. However, other countries

have been less quick to respond to the Commission’s recommendations. The Commission has

recently expressed concern about potentially high MTRs in France, Estonia, Spain and Latvia (see

for example “Digital Agenda: Commission queries French regulator's proposal to set higher

wholesale prices for Free Mobile, Lycamobile & Oméa Telécom; starts investigation”).

10 It should be noted that MTRs have not yet fallen as far as the Commission recommended. As of

2011Q3, the weighted average MTR in Member States was €c3.9, whereas the Commission

recommended that MTRs should fall to €c2.5 by 2012.



Greece, as it can be considered as an outlier due to the recent financial and

economic crises.11

We measure mobile prices as average revenue per minute (ARPM) 12, as this is

consistent with what the Commission used for its prediction on mobile prices.

For usage, we use data on outgoing minutes of use per active subscriber.

Measuring usage on a per subscriber basis allows us to control for changes in the

number of subscribers. Where possible we use data from Analysys Mason’s

Telecoms Market Matrix for mobile usage, mobile prices and F2M usage (see

Annex for a more detailed description of the variables that we have used and the

data sources).

1.2 Structure of the report

The remainder of this report examines the available evidence on each of the main

consumer impacts from MTR cuts expected by the Commission.

Section 2 examines the link between MTR cuts and mobile prices.

Section 3 focusses on the relationship between MTR cuts and mobile

usage.

Section 4 examines whether the European mobile markets are converging

towards a US-style environment.

Section 5 looks at whether there has been an impact on competition from

the MTR reductions.

Section 6 examines the impact of MTR cuts on the fixed market.

Section 7 presents the impact of the accelerated MTR cuts on mobile

penetration rates and mobile investment levels.

Section 8 summarises our key findings.

11 Including Greece would not however had any significant impact on our conclusions.

12 The ARPM is calculated as Voice retail revenue (excluding interconnection payments) divided by outgoing

mobile minutes.


There is no evidence that faster MTR cuts have

led to lower mobile prices

2 There is no evidence that faster MTR cuts

have led to lower mobile prices

The Commission expected MTR cuts to lead to lower mobile prices for two

reasons:

First, lower MTRs would reduce the marginal cost of mobile to mobile

calls and so be expected to lead to lower retail average mobile-to-mobile

call prices; and

lower MTRs would assist smaller operators and so increase the intensity of

retail competition in mobile markets.

The impact of MTR cuts on mobile prices is, however, potentially complex, as

the tariff structure in the mobile sector includes call prices (including mobile to

mobile calls), connection charges, handset subsidies and monthly rentals. In this

context, whilst reductions in MTRs could lead to lower mobile to mobile call

prices, they can also be expected to increase other tariffs, such as subscription

charges. The reason for this is that reductions in termination rates will also lead

to reductions in fixed-to-mobile termination revenues, which could be expected,

absent any other change, to lead to mobile operators’ revenues failing to recover

their costs, unless some other retail prices are raised. This concept is known as

the ‘waterbed effect’.

The ‘waterbed effect’, has been tested and confirmed empirically. For example,

Genakos and Valletti (2008)13 tested it in a set of 24 countries, all European with

the exception of New Zealand, Australia, Japan and Turkey. The results have

shown that a reduction in MTRs by 11% lead to an overall increase in mobile

outgoing prices of 13.3%. The Commission recognised the waterbed effect in

2009 but believed that lower MTRs would assist smaller mobile operators and

thereby increase the competitive intensity of the mobile market, preventing

significant increases in prices.

We find that although mobile prices in Europe have indeed been falling rather

than rising, there is no support for the view that this has been driven by MTR

cuts.

This is supported by the following pieces of evidence.

Policy-shift impact. Although MTR cuts have accelerated since 2009, the

fall in mobile prices has in fact slowed down. Correlation analysis reveals

13 Genakos and Valletti (2008): “Testing the ‘Waterbed’ Effect in Mobile Telephony”, CEIS TOR

Vergata, Research Paper Series, Vol.6, Issue 2, No. 110.




that the countries with the largest MTR cuts have not had the largest falls in

prices.

Longer-term relationship. Econometric analysis also shows that the

acceleration of MTR cuts has not impacted prices.

2.1 Prices have declined at a slower rate despite the

accelerated fall in MTRs

Despite the step-change in the rate of MTR declines since 2009, the fall in prices

has actually slowed slightly, as shown by Figure 3 below. This casts doubt on the

Commission’s prediction that faster MTR cuts would lead to greater falls in

prices (measured as average revenue per minute, ARPM14).

14 Calculated as voice retail revenue generated by mobile services on a given network (excludes

interconnection payments) divided by outgoing mobile minutes in a given period.




Figure 3. Trends in weighted average MTRs and mobile prices since 2007

Source: Frontier analysis using BEREC information on MTRs and Analysys Mason data on ARPM.

0

20

40

60

80

100

120

1Q2007

3Q2007

1Q2008

3Q2008

1Q2009

3Q2009

1Q2010

3Q2010

1Q2011

3Q2011

Weighted average

ARPM MTR

12.8% 14.4%

35.5%

13.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Annual reduction in MTRs Annual reduction in ARPM

CA

GR

2007-09 2009-11




2.2 Correlation analysis shows no link between MTR

cuts and prices

There is also no evidence to suggest that those countries with higher MTR cuts

have had higher falls in mobile prices. Simple correlation analysis shows that

there is no relationship between MTR cuts and changes in ARPM since 2009

(Figure 4). This could be explained by the waterbed effect, whereby any MTR

driven fall in average mobile-to-mobile call prices is being partially or fully offset

by higher fixed charges or lower handset subsidies. Our result is not sensitive to

the chosen time period, as we reach the same conclusion when looking at the

MTR cuts and changes in ARPM since 2007 (see Figure 5).

Figure 4. Correlation analysis of MTR cuts and prices (2009Q1 to 2011Q3)

Source: Frontier analysis using BEREC information on MTRs and Analysys Mason data.

y = -0.00x + 0.19R² = 0.00

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Reduction in A

RP

M

Reduction in MTRs

1Q 2009 to 3Q 2011




Figure 5. Correlation analysis of MTR cuts and prices (2007Q1 to 2011Q3)


2.3 Additional statistical analysis also shows no

evidence that faster MTR cuts have led to lower

prices

Mobile prices are likely to be affected by several factors, most notably costs. In

competitive markets, lower costs should be passed through to lower prices.

The Commission’s Recommendation will lead to lower MTRs but will not have

had any impact on the total costs of providing mobile services. In this sense, the

Recommendation simply represents a different way of recovering the same total

costs. The relationship between MTRs and prices will depend on what is causing

the fall in MTRs.

Econometric analysis allows us to seek to distinguish between the effect on

prices of a) falling costs of providing mobile services and b) the Commission’s

Recommendation. This is achieved by interacting MTRs with a time dummy that

takes on a value of 1 from 2009 onwards, which is when the Commission made

its Recommendation. This interaction term can be expected to capture the effect

y = -0.0989x + 0.4517R² = 0.0045

0%

10%

20%

30%

40%

50%

60%

70%

80%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Red

uctio

n in A

RP

M

Reduction in MTRs

1Q 2007 to 3Q 2011




of the Recommendation on prices. We use annual data from 2005 to 2011

covering 23 countries (further details of the data used are contained in an annex).

We ran a regression of prices (ARPM) on MTRs, MTRs interacted with a time

dummy and GDP per capita.15 We found that the co-efficient on the MTR

interaction term is not significant (see Table 1). More sophisticated statistical

techniques therefore suggest that there does not appear to be a positive

relationship between accelerated MTR cuts (the policy shift) and ARPMs.

Our finding that there is no link between MTRs and prices is also consistent with

work by Veronese and Pesendorfer (2009)16 who stated that “our overall conclusion is

that the evidence does not robustly show that the level of MTRs affects the (average) level of

retail prices.”

Table 1. Regression results on the link between MTRs and prices

Variable Coefficient P-value17

Constant 12.751 0.002

MTRs – cost trend 0.208 0.082

MTRs – policy impact 0.008 0.691

GDP per capita -1.434 0.001

Source: Frontier analysis

15 We use fixed effects on a panel data set of 23 countries between 2005-2011. Our preferred

specification is Log(ARPMit)=β0+β1Log(MTRit)+ β2 D2009-2011 *Log(MTRit)+β3 Log(GDPcapit)+ui+εit

16 Wholesale Termination Regime, Termination Charge Levels and Mobile Industry Performance – A

study undertaken for Ofcom (Veronese and Pesendorfer 2009).

17 The P-value reflects the probability that the co-efficient is equal to zero. Typically, if the p-value is

below 0.05, you would conclude that the co-efficient is significantly different to zero.


There is no evidence that MTR cuts are

increasing usage

3 There is no evidence that MTR cuts are

increasing usage

The Commission expected that steeper MTR cuts would lead to a faster increase

in usage. The following evidence shows that this prediction has not occurred so

far.

Policy-shift impact. Despite the structural break in MTR reductions since

2009, there is no evidence that usage has increased at an accelerated rate.

Correlation analysis shows that the countries with the largest MTR cuts have

not had the largest increases in usage.

Longer-term relationship. Using more sophisticated statistical analysis

further supports our conclusions that MTR cuts haven’t increased usage.

3.1 Despite the faster falls in MTRs usage has not

increased at an accelerated rate

As indicated earlier, MTRs have fallen at a much faster rate since the

Commission’s Recommendation in 2009. Usage (average minutes per active

subscriber) on the other hand, has continued to increase at broadly the same rate,

as shown by Figure 6. This is consistent with accelerated MTR cuts not

translating into increases in usage.



increasing usage

Figure 6. Annual reductions in MTRs and usage (2007-09 vs. 2009-11)

Source: Frontier analysis using BEREC information on MTRs and Analysys Mason data

3.2 Correlation analysis shows no evidence that MTR

cuts have led to higher usage

There is no evidence that the countries with the highest MTR cuts have had the

largest increases in usage. In fact, correlation analysis actually shows the reverse,

as countries with the largest MTR cuts have tended to have the smallest increases

in usage since 2009 (see Figure 7). This suggests that although the trend has

been for usage to rise, there is no evidence of a relation to faster MTR cuts. We

reach the same conclusion when looking at the changes in MTRs and usage since

2007 (see Figure 8).

12.8%

3.7%

35.5%

4.2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Annual reduction in MTRs Annual change in usage

CA

GR

2007-09 2009-11



increasing usage


2011Q3)


y = -0.3253x + 0.2315R² = 0.1187

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Change in m

inute

s o

f use

Reduction in MTRs

1Q 2009 to 3Q 2011



increasing usage


2011Q3)


3.3 More sophisticated statistical analysis also

shows no evidence that MTR cuts have led to

higher usage

Usage (average minutes per subscriber) is likely to be influenced by a range of

factors other than just MTRs. GDP per capita is likely to boost usage, as higher

GDP per capita is likely to increase consumers’ disposable incomes. Penetration

rates are also likely to have a positive impact on average usage, as there will be

more potential people to call for a given subscriber. Using econometrics allows

us to control for these other factors that might help explain usage. This makes it

easier to isolate any effect of MTRs on usage.

We run a regression of usage on MTRs, penetration rates and GDP per capita.18

The co-efficient on MTRs is positive (this is the opposite result to what the


specification is Log(Minutesit)=β0+β1Log(MTRit)+ β2Log(Penetrationit)+β3 Log(GDPcapit)+ui+εit

y = -0.8033x + 0.6945R² = 0.0766

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Cha

ng

e in m

inute

s o

f u

se

Reduction in MTRs

1Q 2007 to 3Q 2011



increasing usage

Commission projected) although not statistically significant (see Table 2). In

other words, the statistical analysis does not find any robust statistical evidence

that faster MTR cuts lead to higher usage. This result is robust to a range of

specifications.19 Our result that MTRs do not impact usage is also consistent with

previous work by Veronese and Pesendorfer (2009)20 who “did not find robust

statistical evidence on the relationship between usage and level of MTRs”.

Table 2. Regression results on the link between MTRs and usage


Constant -3.281 0.125

MTR 0.095 0.119

Mobile penetration 0.375 0.100

GDP per capita 0.816 0.001


We also tried controlling for the impact of the economic slowdown. We did this

by including the change in the growth rate in GDP per capita. This should, to

some extent, be a proxy for changes in consumer and business confidence.

Including this variable does not change our conclusion that the co-efficient on

MTRs is positive and statistically insignificant (see Table 3).

19 We tried using levels rather logs; using random effects; transforming all of the variables into first

differences; restricting our sample to the EU15 countries; including a lag of MTRs.

20 Wholesale Termination Regime, Termination Charge Levels and Mobile Industry Performance – A

study undertaken for Ofcom (Veronese and Pesendorfer 2009).





increasing usage

Table 3. Regression results on the link between MTRs and usage when accounting

for the economic slowdown


Constant -4.027 0.076

MTR 0.067 0.251

Mobile penetration 0.293 0.202


Change in growth of






A lack of convergence to a US style market

4 A lack of convergence to a US style market

In its final impact assessment23, the Commission stated that “in countries with low

termination rates, retail prices are frequently lower and consumption levels higher than countries

with higher termination rates.” The Commission then specifically refer to the US as

an example of a country with low ARPM.

4.1 Comparison of Europe and US

To assess whether EU countries have become more like countries with low

MTRs since the Commission’s recommendation, we use the US as a

benchmark.24 The US is an obvious benchmark as it has a ‘Bill and Keep’

interconnection regime amongst mobile operators, meaning that mobile

operators do not pay for the interconnection of calls between them. The US

market is characterised by high usage and low implied average retail prices

compared to Europe.

Despite the significant increase in the rate of reductions of MTRs across Europe,

there has been very little convergence in usage between Europe and the US, as

shown by Figure 9 below.25 There has been some narrowing in prices between

Europe and the US, as shown by Figure 10. However, this convergence arose

prior to 2009. Taking everything into account, there is no evidence to suggest

that the Commission’s recommendation has led to the consumer outcomes in

Europe converging to the US ones.



24 We use Merrill Lynch data because Analysys Mason data is not available for the US.

25 We downwards adjust the usage data for the US to make it comparable to Europe. The adjustment

takes into account that a) there is a double counting of on-net minutes for the US, b) ringing time is

included in the US data and c) calls in the US are rounded to the nearest minute.


A lack of convergence to a US style market

Figure 9. Comparison of usage trends between Europe and the US (2007-11)

Source: Frontier analysis using Merrill Lynch data

Figure 10. Comparison of price trends between Europe and the US (2007-11)

Source: Frontier analysis using Merrill Lynch data

0

100

200

300

400

500

600

US EUROPE US EUROPE US EUROPE US EUROPE US EUROPE

2007 2008 2009 2010 2011

Avera

ge m

inute

s o

f use

EuropeUS - Adjusted value

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

US EUROPE US EUROPE US EUROPE US EUROPE US EUROPE

2007 2008 2009 2010 2011

Avera

ge r

evenue p

er

min

ute

(U

SD

)

Europe GapUS - Adjusted value


There is limited evidence of any link between

MTR reductions and the market share of smaller

operators

5 There is limited evidence of any link

between MTR reductions and the market

share of smaller operators

The Commission predicted that lower MTRs would increase competition in the

mobile market. In particular, it expected that lower MTRs would make it easier

for smaller operators to compete26:

“a significant reduction in termination rates to the cost level of efficient service provisioning would

likely reduce the magnitude of any financial disadvantages stemming from traffic imbalances and

thereby help facilitate competition from smaller operators”.

It predicted that this increase in competition would offset any short-term

waterbed effects:

“Increased competitive pressure resulting from the creation of a more level playing field for the

provision of mobile calls will help ensure a continued downward momentum for overall retail

prices, thereby off-setting any potential short-term waterbed effects.”

To analyse the impact that MTR reductions have had on competition we have

looked at the effect of MTR reductions on the market share of the smallest

operator since the Commission’s recommendation in 2009.27 The main finding is

that although nearly all of the smallest operators have experienced an increase in

their market shares, there does not appear to be any relationship between this

and MTR reductions.



27 We identify the smallest operator in 2009Q1 and then look at how the market share of this operator

has changed. Our analysis therefore doesn’t look at new entrants.


There is limited evidence of any link between

MTR reductions and the market share of smaller

operators

Figure 11. Correlation analysis of MTR cuts and changes in the market share of the

smallest operator (2009Q1 to 2011Q3)

Source: Frontier analysis using Telegeography data on market shares and BEREC information on MTRs

y = -0.0073x + 0.0284R² = 0.0028

-0.02

-0.01

0.00

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0% 10% 20% 30% 40% 50% 60% 70% 80%Pe

rce

nta

ge

po

int

incre

ase

in

sh

are

of

sm

alle

st

op

era

tor

MTR reduction


MTR cuts and the fixed market

6 MTR cuts and the fixed market

Up to this point, we have focussed on what appear to have been the two main

objectives of the Commission, namely mobile prices and usage. The Commission

also predicted that its Recommendation would have little impact on the fixed

market. We find that the evidence is not consistent with the MTR cuts being fully

passed on as lower fixed-to-mobile call prices to fixed consumers, whilst fixed-

to-mobile usage has not increased.

In the remainder of this section we present our findings for the following impact

channels:

fixed-to-mobile usage; and

fixed-to-mobile prices.

6.1 Impact on fixed-to-mobile usage

As the Commission predicted, the MTR cuts seem to have had little impact on

fixed-to-mobile (F2M) usage. Total F2M traffic has fallen slightly with no

noticeable change in the level of F2M usage per fixed subscriber between 2007

and 2011.



Figure 12. Trends in fixed-to-mobile traffic since 2007

Source: Analysys Mason

6.2 Impact on fixed-to-mobile prices

The available evidence suggests that the lower MTRs have not been fully

reflected in lower F2M call prices. For example, correlation analysis shows that

countries with the largest MTR cuts have not had the largest reductions in F2M

call prices (see Figure 13).

0

10

20

30

40

50

60

70

80

90

100

2007 2008 2009 2010 2011

FT

M m

inu

tes (

bn

)



Figure 13. Correlation analysis of MTR cuts and changes in F2M prices (2009 to

2011)


Consistent with the above cross-country evidence, lower mobile termination

rates on F2M calls have not been fully passed through to retail F2M call prices –

see Figure 14. Since the Commission’s Recommendation in 2009, we estimate

that fixed operators’ margins have increased from €5bn to €6bn, despite falling

volumes.

y = 0.2261x - 0.2167R² = 0.0334

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

-10% 0% 10% 20% 30% 40% 50% 60% 70%

Change in F

2M

AR

PM

MTR reduction

2009 to 2011



Figure 14. Trends in F2M margins since 2007

Source: Frontier analysis using Analysys mason data.

There is variation in the relationship between MTRs and F2M prices across countries, partly reflecting differences in the regulatory environment. Operators in some countries, such as Germany and Poland28, are required to pass-through MTR reductions to F2M prices. On the other hand, MTR margins have increased in many countries where there are no such regulatory constraints.

28 Ovum Country Regulation overviews.

0

1

2

3

4

5

6

7

8

9

10

2007 2008 2009 2010 2011

Ma

rgin

(€c)


Accelerated MTR cuts could have a detrimental

impact

7 Accelerated MTR cuts could have a

detrimental impact

MTR cuts could also affect other areas that are important for consumer

outcomes. In particular, MTR levels could impact mobile penetration rates and

mobile operators’ investment levels. We find that it is too early to conclude

whether the accelerated MTR cuts are having a detrimental impact on mobile

penetration rates and investment (capex), but there is some evidence of a risk.

The following sections present our findings for the following impact channels:

mobile penetration rates; and

mobile operators’ capex;

7.1 Impact on mobile penetration rates

There is some evidence that MTR cuts have dampened the increase in mobile

penetration rates. Between 2007 and 2011, mobile penetration rates rose in all

countries. However, mobile penetration rates have increased at a slower rate

since the Commission’s Recommendation on MTRs.



impact

Figure 15. Annual changes in MTRs and penetration rates (2007-09 vs. 2009-11)


Correlation analysis shows that the countries with the largest MTR reductions

have tended to have smaller increases in penetration rates, providing evidence of

the risk of an adverse effect.

12.8%

8.5%

35.5%

6.8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Annual reduction in MTRs (CAGR) Annual percentage point increasein penetration

2007-09 2009-11



impact

Figure 16. Correlation analysis of MTR cuts and changes in penetration rates

(2009Q1 to 2011Q3)

Source: Frontier analysis using BEREC information on MTRs and Analysys Mason data on mobile

penetration

7.1.1 Additional statistical analysis supports a penetration level risk

Mobile penetration rates are likely to be affected by several factors other than

MTRs. For example, despite most European countries having reached mobile

penetration levels of 100% or more, overall take-up rates have continued to

increase in most countries over the last years.

Econometric analysis again allows us to distinguish between the effect on

penetration rates of a) falling costs of providing mobile services, b) the

Commission’s Recommendation, and c) the general diffusion effect. This is

achieved by interacting MTRs with a time dummy that takes on a value of 1 from

2009 onwards, which is when the Commission made its Recommendation. This

interaction term can be expected to capture the effect of the Recommendation

on penetration rates. We use annual data from 2005 to 2011 covering 23

countries.

y = -0.1148x + 0.1527R² = 0.0564

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0% 10% 20% 30% 40% 50% 60% 70% 80%

Perc

enta

ge p

oin

t change in m

obile

penetr

ation

Reduction in MTRs

1Q 2009 to 3Q 2011



impact

We ran a regression of mobile penetration rates on MTRs, MTRs interacted with

a time dummy, a linear time trend and GDP per capita.29 We found that the co-

efficient on the MTR interaction term is positive and significant (see Table 4).

More sophisticated statistical techniques are therefore consistent with a

relationship between accelerated MTR cuts (the policy shift) and slower increases

in penetration rates – this would be consistent with the operation of a waterbed

effect, suggesting that MTRs cuts in excess of reductions in underlying costs

could have dampened mobile penetration.

Table 4. Regression results on the link between MTRs and penetration rates


Constant -1.835 0.344

MTRs – cost trend 0.045 0.261

MTRs – policy impact 0.256 0.004

Diffusion factor 0.068 0.000



7.2 Impact on mobile capex

As F2M revenues decline, and absent a ‘complete waterbed’, this would be

expected to imply that mobile operators will have fewer funds for investments.

There is a risk therefore that mobile operators’ capex will fall, as a result of

accelerated MTR cuts. Correlation analysis, as shown in Figure 17 below, reveals

that those countries with higher MTR cuts have indeed had larger falls in capex

per connection (although the simple statistical test suggests that this is a weak

link). We have looked at the relationship between the lag in MTRs and capex per

connection because mobile operator’s investment plans are normally determined

some time in advance.


specification is Log(Penetrationit)=β0+β1Log(MTRit)+ β2 D2009-2011 *Log(MTRit)+ β3 (Time trend) +β4

Log(GDPcapit)+ui+εit





impact

It is difficult to form firm conclusions about the impact on capex however at this

stage, as it will be influenced by a range of factors. But the current evidence is

consistent with the existence of a risk that capex could be adversely impacted by

accelerated MTR cuts.

Figure 17. Correlation analysis of MTR cuts and changes in capex per connection

(2009Q1 to 2011Q3)

Source: Frontier analysis using data from Wireless Intelligence and BEREC reports.

y = -0.4509x + 0.0986R² = 0.0235

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Cha

ng

e in c

ape

x p

er

co

nn

ectio

n

Reduction in MTRs - one year lag

1Q 2009 to 3Q 2011


Summary

8 Summary

MTRs have fallen at a much faster rate since 2009. If countries continue to move

towards MTRs based on ‘pure LRIC’, as appears likely, then this trend is likely to

continue going forward. This report has provided an initial assessment of how

consumer outcomes have changed. Our key conclusions are as follows.

No link to usage and prices. Although usage has increased and prices

have fallen, there is no evidence that these trends have been related to

accelerated reductions in mobile termination rates. Despite a tripling in the

rate of termination rate cuts since the introduction of the Commission’s

recommendation, we have not found evidence at the EU level of an

acceleration in the rate of mobile price reductions or the rate of usage

increase. Correlation analysis and econometric analysis confirms these

findings.

No evidence of a link between MTR reductions and the market

position of smaller players. There appears to be no evidence of a positive

link between the market share of smaller operators and the acceleration in

MTR reductions since 2009.

Potential risk of lower take-up and investment. It is too early to draw

conclusions on the impact of accelerated mobile termination rate cuts on

penetration rates and investment levels - there is a risk that they could have a

detrimental impact.


Annex 1: Data used

Annex 1: Data used

Countries

We have used data from countries in the EU-27, except for Malta, Luxembourg

and Cyprus due to data limitations. We have also excluded Greece, as we

consider it to be an outlier given its recent extreme economic crisis.

Time period

For our econometric analysis, we use annual data covering the period from 2005

to 2011. Our correlation analysis covers the period between 2009Q1 to 2011Q3.

For mobile prices and usage, we have also done correlation analysis for 2007Q1

to 2011Q3 as a robustness check. We have used a longer time series for the

econometrics than we used for the correlation analysis, so that we could get a

larger sample.

Variables

The following table provides a description of the data that we have used. 31

31 More details of the data that we have used are available upon request.


Annex 1: Data used

Table 5. Data used in our analysis

Variable Definition Source Areas of analysis

Average mobile

prices (1)

Voice retail revenue (excluding

interconnection payments)

divided by outgoing mobile

minutes.

Analysys Mason Correlation analysis,

econometrics

MTRs Mobile Termination Rate set

by the regulator

BEREC reports Correlation analysis,

econometrics

Mobile usage Outgoing minutes of use per

active subscriber


econometrics

Mobile penetration End of period active

subscribers as a percentage of

national population at year end

Analysys Mason Econometrics

GDP per capita GDP per capita adjusted for

Purchasing Power Parity

IMF Econometrics

Average mobile

prices (2)

Voice ARPU (reported ARPU

or service revenue per

average subscriber, adjusted

to exclude non-voice

revenues) divided by reported

MOU.

Merrill Lynch Comparison between

the US and Europe

Mobile usage The Minutes of Use per month

per average user is calculated

by dividing total minutes of use

on the operator’s network by

the average subscriber base

during the quarter. It is

measured in minutes and

usually excludes traffic related

to Mobile Data services. It

includes both incoming and

outgoing minutes.

Merrill Lynch Comparison between

the US and Europe

Capex Capex per connection Wireless Intelligence Correlation analysis

Fixed-to-mobile

prices

Fixed-to-mobile revenue

divided by fixed-to-mobile

traffic.


graphical analysis of

pass-through

Fixed-to-mobile

usage

Calls originated on circuit-

switched fixed networks and

terminating on mobile

networks.

Analysys Mason Graphical analysis

Market shares Number of subscribers for

each operator as a percentage

of the total number of

subscribers in that country.

Telegeography Correlation analysis



Annex 1: Data used

High-level summary charts

The following figures show the changes in MTRs, ARPM, usage per active subscriber

and mobile penetration between 2007Q1 to 2011Q3.

Figure 18. Reduction in MTRs (2007Q1 to 2011Q3)

Source: BEREC information

0%

10%

20%

30%

40%

50%

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d

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k R

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d

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nia

MT

R r

eduction


Annex 1: Data used

Figure 19. Reduction in Average Revenue Per Minute (ARPM) (2007Q1 to 2011Q3)


Figure 20. Change in minutes of use per active subscriber (2007Q1 to 2011Q3)


0%

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30%

40%

50%

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80%

Au

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vera

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Austr

ia

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Bulg

aria

Port

ugal

Neth

erland

s

Germ

any

Belg

ium

Pola

nd

UK

Hun

gary

Den

mark

Lithuan

ia

Esto

nia

Czech R

ep

Spain

Italy

Ire

lan

d

Latv

ia

Slo

va

k R

ep

Fin

lan

d

Rom

ania

Cha

ng

e in m

inute

s o

f use


Annex 1: Data used

Figure 21. Percentage point change in mobile penetration (2007Q1 to 2011Q3)


Raw data

The following tables provide the key raw data that we used in our analysis.

0.00

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nia

Change in m

obile

phone p

enetr

ation


Annex 1: Data used

Figure 22. Mobile termination rates (€c/min)

Source: BEREC information

Figure 23. Mobile penetration rates (% of total population)


1Q 2007 3Q 2007 1Q 2008 3Q 2008 1Q 2009 3Q 2009 1Q 2010 3Q 2010 1Q 2011 3Q 2011

Austria 0.091 0.076 0.068 0.060 0.060 0.040 0.035 0.030 0.025 0.020

Belgium 0.116 0.090 0.090 0.087 0.087 0.087 0.088 0.089 0.043 0.043

Bulgaria 0.184 0.184 0.183 0.151 0.135 0.135 0.091 0.099 0.064 0.064

Czech Rep 0.103 0.104 0.113 0.126 0.111 0.087 0.076 0.065 0.055 0.044

Denmark 0.114 0.098 0.098 0.085 0.086 0.074 0.074 0.060 0.060 0.044

Estonia 0.169 0.169 0.107 0.088 0.088 0.087 0.087 0.078 0.078 0.070

Finland 0.071 0.071 0.053 0.053 0.050 0.050 0.049 0.049 0.044 0.044

France 0.078 0.078 0.069 0.069 0.069 0.048 0.048 0.031 0.031 0.020

Germany 0.091 0.091 0.082 0.082 0.082 0.068 0.068 0.068 0.034 0.034

Hungary 0.116 0.099 0.080 0.086 0.063 0.059 0.052 0.051 0.043 0.045

Ireland 0.101 0.101 0.099 0.099 0.096 0.096 0.097 0.080 0.056 0.046

Italy 0.122 0.109 0.108 0.108 0.094 0.082 0.082 0.083 0.070 0.054

Latvia 0.090 0.090 0.089 0.088 0.088 0.088 0.088 0.067 0.049 0.042

Lithuania 0.078 0.078 0.078 0.078 0.063 0.063 0.042 0.046 0.029 0.032

Netherlands 0.114 0.114 0.104 0.094 0.094 0.073 0.073 0.060 0.042 0.042

Poland 0.112 0.104 0.116 0.107 0.056 0.040 0.043 0.043 0.043 0.042

Portugal 0.110 0.110 0.110 0.110 0.072 0.066 0.065 0.060 0.050 0.040

Romania 0.074 0.074 0.066 0.068 0.060 0.054 0.053 0.051 0.051 0.051

Slovak Rep 0.107 0.111 0.106 0.113 0.099 0.099 0.073 0.065 0.066 0.055

Slovenia 0.144 0.144 0.075 0.064 0.065 0.054 0.052 0.049 0.046 0.042

Spain 0.105 0.098 0.082 0.071 0.064 0.057 0.062 0.056 0.050 0.045

Sweden 0.071 0.060 0.059 0.046 0.039 0.030 0.031 0.027 0.027 0.023

UK 0.090 0.084 0.074 0.077 0.072 0.056 0.055 0.053 0.052 0.034

1Q 2007 3Q 2007 1Q 2008 3Q 2008 1Q 2009 3Q 2009 1Q 2010 3Q 2010 1Q 2011 3Q 2011

Austria 103% 106% 110% 113% 119% 121% 126% 129% 133% 135%

Belgium 91% 96% 101% 105% 107% 109% 111% 113% 114% 116%

Bulgaria 103% 114% 122% 127% 130% 132% 134% 135% 141% 147%

Czech Rep 111% 114% 116% 118% 120% 122% 123% 123% 124% 125%

Denmark 109% 113% 113% 120% 123% 128% 134% 132% 132% 137%

Estonia 118% 119% 121% 127% 128% 129% 131% 134% 141% 142%

Finland 109% 113% 119% 126% 134% 142% 149% 158% 165% 168%

France 82% 83% 86% 87% 90% 91% 94% 95% 98% 98%

Germany 98% 104% 110% 116% 117% 121% 122% 122% 125% 128%

Hungary 93% 96% 100% 104% 107% 105% 107% 107% 108% 108%

Ireland 105% 109% 113% 116% 118% 119% 122% 124% 125% 127%

Italy 132% 137% 140% 139% 138% 134% 135% 137% 139% 140%

Latvia 93% 97% 98% 101% 101% 102% 103% 110% 109% 114%

Lithuania 135% 140% 142% 144% 143% 141% 141% 145% 145% 150%

Netherlands 102% 110% 116% 120% 124% 127% 116% 116% 116% 119%

Poland 93% 99% 104% 107% 110% 111% 112% 114% 118% 121%

Portugal 115% 120% 127% 134% 139% 142% 147% 149% 151% 151%

Romania 78% 91% 103% 113% 117% 119% 121% 122% 120% 120%

Slovak Rep 94% 94% 97% 98% 101% 98% 103% 106% 109% 111%

Slovenia 90% 93% 96% 99% 101% 102% 103% 103% 103% 105%

Spain 103% 106% 110% 112% 115% 118% 117% 121% 124% 126%

Sweden 106% 111% 113% 119% 123% 128% 130% 134% 137% 142%

UK 110% 112% 116% 119% 120% 122% 125% 127% 128% 128%


Annex 1: Data used

Figure 24. Average revenue per minute (€c/min - voice only)

Source: Calculated based on the Analysys Mason Telecoms Market Matrix

Figure 25. Average outgoing minutes per active subscriber


1Q 2007 3Q 2007 1Q 2008 3Q 2008 1Q 2009 3Q 2009 1Q 2010 3Q 2010 1Q 2011 3Q 2011

Austria 0.15 0.14 0.11 0.11 0.09 0.10 0.08 0.08 0.08 0.07

Belgium 0.22 0.20 0.18 0.17 0.16 0.16 0.15 0.15 0.14 0.14

Bulgaria 0.12 0.10 0.09 0.08 0.07 0.07 0.07 0.07 0.06 0.06

Czech Rep 0.15 0.15 0.16 0.17 0.12 0.13 0.11 0.12 0.11 0.11

Denmark 0.16 0.16 0.14 0.15 0.14 0.13 0.13 0.12 0.11 0.10

Estonia 0.15 0.13 0.11 0.10 0.09 0.09 0.08 0.08 0.07 0.07

Finland 0.10 0.10 0.09 0.09 0.09 0.09 0.08 0.08 0.08 0.08

France 0.15 0.16 0.15 0.16 0.14 0.15 0.13 0.14 0.12 0.12

Germany 0.20 0.19 0.15 0.14 0.13 0.12 0.11 0.11 0.10 0.10

Hungary 0.10 0.10 0.09 0.10 0.07 0.08 0.07 0.07 0.06 0.06

Ireland 0.17 0.17 0.14 0.13 0.14 0.13 0.12 0.12 0.10 0.10

Italy 0.15 0.14 0.12 0.13 0.11 0.12 0.10 0.10 0.08 0.09

Latvia 0.11 0.08 0.09 0.09 0.09 0.08 0.07 0.07 0.07 0.07

Lithuania 0.07 0.07 0.07 0.06 0.05 0.04 0.03 0.03 0.03 0.03

Netherlands 0.22 0.23 0.20 0.21 0.20 0.20 0.18 0.17 0.15 0.15

Poland 0.12 0.10 0.10 0.11 0.07 0.07 0.06 0.06 0.06 0.05

Portugal 0.16 0.16 0.15 0.13 0.12 0.11 0.10 0.09 0.08 0.08

Romania 0.07 0.08 0.06 0.06 0.04 0.04 0.03 0.03 0.02 0.02

Slovak Rep 0.11 0.13 0.11 0.14 0.12 0.11 0.09 0.10 0.10 0.10

Slovenia 0.11 0.12 0.11 0.13 0.10 0.11 0.09 0.10 0.09 0.10

Spain 0.18 0.19 0.19 0.18 0.17 0.17 0.17 0.17 0.15 0.14

Sweden 0.15 0.14 0.12 0.12 0.09 0.09 0.09 0.09 0.09 0.09

UK 0.17 0.16 0.13 0.12 0.10 0.10 0.09 0.09 0.09 0.08

1Q 2007 3Q 2007 1Q 2008 3Q 2008 1Q 2009 3Q 2009 1Q 2010 3Q 2010 1Q 2011 3Q 2011

Austria 155 161 177 169 179 171 172 164 166 163

Belgium 100 103 103 105 102 102 102 103 99 98

Bulgaria 58 69 74 84 82 89 86 93 96 94

Czech Rep 80 84 84 87 90 92 94 97 99 100

Denmark 117 121 130 125 124 124 123 130 136 140

Estonia 109 123 117 120 110 115 109 120 108 126

Finland 189 188 186 180 174 167 164 159 152 151

France 162 156 160 150 152 143 145 140 144 139

Germany 68 71 74 78 79 81 82 85 84 84

Hungary 113 121 122 130 125 132 129 137 134 141

Ireland 151 160 176 191 165 168 171 173 175 175

Italy 91 96 98 102 104 107 112 119 118 121

Latvia 101 152 123 134 114 126 113 113 110 110

Lithuania 73 88 81 101 98 104 113 122 124 129

Netherlands 95 86 89 85 85 83 93 96 101 97

Poland 68 83 82 91 93 99 106 113 112 114

Portugal 89 95 88 100 94 106 100 115 112 114

Romania 94 99 107 110 124 145 159 169 180 191

Slovak Rep 103 102 105 103 105 116 122 122 111 110

Slovenia 128 128 133 129 138 140 147 143 148 139

Spain 118 125 114 121 108 114 106 110 103 107

Sweden 127 133 140 140 140 143 149 149 149 146

UK 120 126 130 132 129 128 131 128 123 123


Annex 1: Data used

Figure 26. Fixed-to-mobile average revenue per minute (€c/min)


Figure 27. Total fixed-to-mobile usage (millions of minutes)

Source: Analysys Mason Telecoms Market Matrix

2007 2008 2009 2010 2011

Austria 0.15 0.14 0.13 0.12 0.11

Belgium 0.18 0.17 0.17 0.16 0.15

Bulgaria 0.26 0.25 0.23 0.20 0.23

Czech Rep 0.16 0.17 0.16 0.15 0.15

Denmark 0.18 0.17 0.16 0.16 0.16

Estonia 0.20 0.19 0.19 0.19 0.18

Finland 0.12 0.13 0.13 0.13 0.13

France 0.14 0.14 0.12 0.11 0.07

Germany 0.14 0.12 0.11 0.09 0.08

Hungary 0.19 0.19 0.17 0.17 0.14

Ireland 0.16 0.16 0.18 0.20 0.23

Italy 0.18 0.17 0.17 0.16 0.16

Latvia 0.14 0.14 0.11 0.09 0.07

Lithuania 0.16 0.15 0.14 0.11 0.09

Netherlands 0.14 0.15 0.14 0.14 0.13

Poland 0.22 0.20 0.13 0.11 0.08

Portugal 0.16 0.17 0.19 0.22 0.24

Romania 0.12 0.10 0.10 0.08 0.06

Slovak Rep 0.25 0.19 0.15 0.13 0.13

Slovenia 0.12 0.12 0.12 0.11 0.05

Spain 0.19 0.19 0.18 0.17 0.15

Sweden 0.11 0.09 0.08 0.09 0.09

UK 0.18 0.16 0.15 0.15 0.15

2007 2008 2009 2010 2011

Austria 1,150 1,155 1,083 1,029 994

Belgium 1,690 1,660 1,631 1,594 1,538

Denmark 1,381 1,317 1,220 1,118 1,007

Finland 803 678 564 491 441

France 11,910 11,686 11,318 10,948 13,648

Germany 14,014 13,402 13,185 13,019 12,896

Ireland 1,495 1,353 1,152 1,002 906

Italy 15,800 14,910 13,150 12,090 11,406

Netherlands 3,562 3,412 3,223 3,125 3,136

Portugal 1,161 1,095 992 889 802

Spain 7,289 6,699 5,883 5,517 5,560

Sweden 3,827 3,859 3,725 3,631 3,578

UK 14,470 13,277 12,155 11,852 10,841

Bulgaria 248 194 214 213 212

Czech Republic 527 451 386 343 316

Estonia 94 89 80 73 72

Hungary 695 636 578 558 721

Latvia 134 133 132 131 130

Lithuania 82 77 63 66 75

Poland 2,003 2,227 2,172 2,255 2,279

Romania 1,134 1,355 1,064 1,142 1,139

Slovakia 229 226 219 228 199

Slovenia 138 144 132 129 128


Annex 1: Data used

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the impact of recent cuts in mobile termination rates across ......a report prepared for vodafone...

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